GATS:
FACT AND FICTIONMisunderstandings
and scare stories:
The GATS and investment

The
fact that under GATS WTO Members can make commitments allowing foreign
suppliers to establish in their markets has led to criticism from some
anti-WTO activists who opposed the negotiations for a Multilateral
Agreement on Investment in the Paris-based Organisation for Economic
Co-operation and Development. The GATS has been said to be an attempt
to resurrect the MAI. Scott Sinclair of the Canadian Centre for Policy
Alternatives has said that "The GATS investment restrictions
demolish industrial policy whether primarily aimed at goods or
services, closing off the path to development taken by most advanced
countries to other countries."

What
these activists have failed to say is that it can be used by
Governments, if they so decide, to attract foreign investment into
sectors where it is needed. The GATS guarantees the conditions which
provide policy stability for potential investors. But there is no
obligation to make commitments under the GATS. Presumably Mr. Sinclair
is stating that the GATS prevents Governments from applying
restrictions to foreign service providers operating in the market.
This is fundamentally untrue. If commitments are made, they can be
subject to the six types of limitations specified in the agreement,
which include, besides quantitative limits, restrictions on the share
of foreign capital and on the type of legal entity permitted. In
addition, any type of national treatment limitation—conditions
applying only to foreign suppliers—can be scheduled. The GATS bears
no resemblance to the MAI—not surprisingly, since the OECD has 30
member Governments and the GATS over 140, three quarters of which are
developing countries or economies in transition. Moreover, the GATS
allows Governments to impose on foreign service providers any
conditions they wish, including those pertaining to local employment
or technology transfer.